International Business Strategy

Question 1.

Evaluation of Strategy and Implementation of Volkswagen

A German automobile manufacturer Volkswagen Group outsources for the production of its vehicles different countries all around the world. As a result of the government to encourage their people to minimize purchasing cars from abroad and support the local producer, the Company proved to show a decline in sales in many countries, but in Western Europe it improved its sale up to eight percent. Volkswagen has intentions to become a world leader deploying innovations and technologies thus satisfy its customers with the quality of their cars. The chief executive sees customers’ satisfaction as the key demand for the long-term success and sets goal to increase sales to more than 10 million vehicles a year. That is why Volkswagen is called bold company with its bold desire to become number one in capturing the major growth markets. It aims to be the most attractive employer in this industry by year of 2018. To become best in building vehicles, they need to have best highly qualified teams in this sector and motivate them in order to achieve goals. The bravery of the Company is also seen in its determination to top Toyota, the world’s number one car seller. Volkswagen for now the largest automaker in Europe has intention to bring their first electric car to the U.S.in a period of two years, thus joining the increasing field of battery-powered vehicles. This will be an important step for the Company to expand in the States. The executive vice president for Volkswagen American unit Marc Trahan considers that the company’s aim is to become a leader in the global context. It has already revamped its strategy in a certain countries after the entry some years ago, tweaking production, localizing parts, concentrating on branding and sales as well as on service.

Porters Five Forces Applied to Automobile Industry

In order to examine the attractiveness of an industry there exists the Porter's Five Forces, known as P5F that looks at five forces which act on that industry. They act as determinants of that profitability of certain industry.

Volkswagen Product Life Cycle of Automobile Industry

The Volkswagen Group tries its product cycle to be shortened in the U.S. by two years to just five years, as Bloomberg business week reports. Today Volkswagen shows the redesigned model every seven years. When using the five-year schedule, Volkswagen wants the models to refresh every three years, claiming that customers want quicker changes. When the head of Volkswagen operation Michael Horn was interviewed about the life cycle of the cars, he explained that the Company is working on shortening of the life cycle of the products in order to bring new features and elements of design so the market obtained it quicker. The Company believes to have positive business case of it, because it makes sense commercially. The shorter cycle probably will not appear until 2017, if such a want gets the go-ahead.

Volkswagen Key Success Factors in Automobile Industry

The company is now selling more cars than it has ever before. After many years of trying, the success is growing in economies scale. There’s the growth of Audi, comparing to the main player in the world’s premium sector, the BMW and Mercedes. As a dominant division, Audi made the biggest contribution to the Company’s profit. Success in China is the other key factor that brought profit to the company and put it on the higher scale of the worlds car industry. The Company has derived benefit through its strong presence in the mass and premium market sector, where Audi became the best-selling brand. The acquisition of Scania doesn’t bring any competence to increase Scania’s performance or value.

Core Competencies and VRIO Framework of Volkswagen

The core competence of Volkswagen Group is its ability to produce cars of great quality. This aspect of the Company’s products has revolutionized the vehicles, though the price for the certain models is far from the cheap. Using the VRIO Framework Analysis, it is possible to prove whether the production costs are low or high. If taking into account the Company’s cars, they are high. Volkswagen methodology of producing is rare because the Company has tried to recreate the system. However it didn’t do it in as efficient of a manner.

Porters Generic Strategy and Strategy Clock or Volkswagen

New technologies, more efficient engines and unique assistance systems give the Company possibilities for improving actual products and apply the process of instant innovation. Another thing that needs to be taken into account is the existence of the Volkswagen in many markets, as it is the international company and focuses on keeping its cars available all around the world The Company uses broad market scope therefore.

Boston Consultancy Group Matrix of Volkswagen

Boston Consultancy Group Matrix was developed to measure the performance and categorize this performance into the market share and companies’ growth rates. The Volkswagen divides its top-selling product-lines in to four ways. Under this matrix, each car brand falls under a certain category, depending on the performance and potential of a particular car brand for the specific and intended market.

Ansoff’s Growth Matrix of Volkswagen

The Ansoff’s matrix gives alternative marketing strategies focusing on the new or existing market. Within Company’s strategy there is a differing level of risk like market penetration, that involves inside the market where Company is represented the segments of the increasing market share. Selling more cars to the customers and by finding new ones within the existing market, the matrix helps to show the right strategy to the Company. Development of the vehicles involves developing of new brands for the existing markets. This process involves thinking about how brands can meet customer needs closely and outperform the competitors’ products. The strategy of market development entails finding new markets for existing products. This will help to research and identify segmentation of and new groups of customers. The matrix also involves moving of new products into new markets thus helping the Company to understand its strategy better.

Question 2.

Description and evaluation of Toyota plan of how to stay competitive or number one in vehicle manufacturing

The realization of the fact that Japanese automobile industry will be developed soon, the son of the family business of carpentry customized in 1897 the Ford production system in order to suit the Japanese market. He devised the same system in the line production of only the parts that needed for the next step on a production line. Such system gave possibility to ease logistics management as material needed to be produced only for consumption. This system was called just in time. That’s how the Toyoda company was created. But after a series of financial problems it faced with after the Second World War, made the organization to downsizing and called for a need to restructure it into different sales and manufacturing departments. So soon it spread over the El Salvador and Saudi Arabia countries, entered also the U. S. market and established the overseas connection with Brazil and thus developed a wide network of overseas plants, widening the market of Toyoda Company. Economic slowdown in Japan has affected the Company’s sales and profits and as a result it was forced to readjust its profit projections and sales. The President decided to control costs removing unnecessary expenses. But when the Company realized the big potential for growth in the global automobile market the same year, it established and set a target to achieve ten percent of market share by the turn of 20 century. Domestic market improved the company’s sales and the president focused on the dealer network, considering the best on the country. Toyota decided to improve communication with its dealers and implemented the strategy of incentives in order to increase sales encouraging them to make more test drives. To attract all age groups, the Toyota leadership took aggressive measures to attract young people to buy its cars. The company understood that dealers’ outlets could attract young customers by creating netter conditions for consuming the cars. On the way to success there were some functional discrepancies. For example, the dealer outlets were located too close to each other and displayed the same models, creating the competitive conditions to one another. The Company stopped supplying similar models and took strict positions as to those who failed to meet the Company targets. Dealers who failed to meet sales goals had to run the risk of losing their leaderships. The Company decided to ask certain dealers for the restructure and renaming of their outlets so to attract more young buyers. Toyota has also invested on advertising and thus its performance began to pick up. When the local financial base strengthened, the president of Toyota Company began focusing on improving the global performance and took direction to the aggressive globalization. The “New Global Business Plan” announced by Toyota was aimed at advancing localization and on increasing imports in a three years. The main target of this was to increase Toyota’s foreign production and build new plants. This short term global business plan was created along with the long term business vision, the major components of which were maintaining of technology competitive edge and globalization acceleration sustaining the market leadership in Japan. Its economic difficulties, according to the analysts, led to continuous variation in the currency value and that was the main reason that made the company consider about the localization of production. A new line of cars met the numerous needs of its customers’ base across the world. Thus Toyota replaced the engines of Lexus cars with the stronger models and made design changes as a result of customers’ feedback. The car sales flushed in the U. S. The gasoline- electric car launching and the production of new hybrid car received good reviews because of its energy conservation and features that were environment friendly. New variants of Lexus brought instant successes in the U. S., helping in consolidating its position in that market.

What Toyota can do to stop Volkswagen to take over and become number one

Toyota cars had success in sales in foreign zones, but there occurred problems within the Japan. According to the reports, Japanese young consumers claimed Toyota cars to lack attitude. It was noticeable when the company saw the numbers indicating losing its young customers to other companies and it could risk losing its future markets as well. As a result of this, Toyota used the aggressive restructuring method starting a new company and designing new brands that would satisfy young generation. Such aggressive marketing effort was focused on advertising as well, which offered high discounts to buyers of the flagging models. The Company focused on reducing and streaming its workforce and against its policy of lifetime employment it hired contract employees so they would provide customers with the products they needed. Such way was expected to help to build mutually benefiting and long term relationships with local suppliers employing local people.

Toyota generic competitive advantage

Today Toyota’s biggest strategy is in new product development that is called by the need to come out with new fresh ideas every year in the automotive industry to have competitive advantage over the other huge companies. Company’s relative position inside the automotive industry identifies whether it profitability is above or below the industry. In cost leadership the Company sets out to become the low cost producer of the cars. Cost advantage of Toyota activities includes pursuit of the economies of scale, proprietary technology and preferential access to raw materials. The Company found and exploited the necessary sources of cost advantage, providing the sustainability of overall cost leadership and commanded prices at industry average. Toyota is the Company that seeks to be unique in its performance, selecting certain attributes that its potential buyers perceive the important. The uniqueness is in a premium price. The other advantage of the Company is the segmentation of its products. Thus the car the Company produces are at various prices in accordance with the wishes of the buyers. It always released the innovative car design, the parts to the cars are easily available and cheap enough so they are affordable for the people.

Toyota competitive strategy

Toyota has successfully propagated its culture as unique one throughout the global manufacturing markets. Its employees have learned philosophy of continuous improvement, planning, doing, check, action, mistake proofing, construction and cost competitiveness in order to increase sales and return Company’s fame. Different solutions have proved the Company and its strategies as the one enough flexible to be adapted to world markets. The overseas Toyota plants have also achieved the quality levels as the company achieved at its plants in homeland. To support its globalization drive, the company created a booklet, which aim was to get all employees acquainted with the corporate philosophy of diversity of work culture. But that was nit the end of Toyota strategies implementation. Focusing on being a driving force in global regeneration the Company implemented the advanced environmental technologies, created automobiles and a motorized society that ensured people safely, securely and comfortably though using the technology, become truly global company that was trusted to and respected by people all around the world.

Evaluation of Toyota strategy

Continuous improvements of the Company strategies made Toyota to plan the revamp of its production and supply. To cut costs, the Company took parts from the countries where these vehicle parts were cheaper, like from Malaysia, Thailand, Philippines and Indonesia. Analysts felt that strong financial condition, globally efficient production system, unique corporate culture, and the ability to develop a product range that met the unique needs and desires of customers in different regions were helping factors to become a truly global automobile major company. Some analysts consider that the company will not be able to sustain its growth in the future because the global automobile market is changeable. But according to the Toyota president, the world’s emerging markets offered huge potential for growth and the company will new ways for the development and improving.